By LAWRENCE TAN

Gianni Versace will shut its three stores in Japan, and according to a report by Nikkei English News, pull out entirely from the Japanese market by the end of the year, as the company undergoes a strategic review to explore business opportunities elsewhere.

“The Versace boutiques in Japan no longer represented the brand image and it was felt to be more advantageous for the company to close them and start with a clean slate,” said a Versace spokesperson from Milan.

Versace joins several other luxury brands that have either scaled back operations or cancelled plans to open new stores in the world’s second-largest economy.

LVMH Moet Hennessy Louis Vuitton decided against opening a 12-storey store in Ginza, Tokyo’s glitziest shopping district. Chanel and Hugo Boss have also closed flagship stores in Japan this year.

A Tokyo-based research firm reports that Japan’s market for imported luxury clothes, bags and other goods fell 10 percent in 2008, compared with the same period a year earlier, and current statistics point to a further drop this year.

Versace Japan posted more than 50 percent drop in its sales here – from 4.1 billion in 2005 to 1.6 billion yen in 2008, Bloomberg reports, quoting Teikoku Data Bank.

Whether the global economic crisis or the management decisions of former Versace CEO Giancarlo di Risio (who presided over the sale of unprofitable units and took control of distribution in Japan and Taiwan during his five-year tenure) is to blame for the brand’s dismal showing in Japan, experts the UK Times Online spoke to say Japanese consumers, on a whole, have already started tightening their purse strings long before the global recession hit.

A sluggish economy and rising unemployment have forced many Japanese to re-think their spending habits. More poignantly, there is a wholesale shift in Japanese consumption, according to Hiroshi Rinno, president of Credit Saison, Japan’s largest store-card financial group, in an interview with the Times.

“Until recently, consumption in Japan was supported by the ‘desire for belonging’ — the wish to have the same branded goods as everyone else. Consumers are not motivated by that any more,” Rinno said.

So, while luxury brands are struggling to understand how an entire nation that used to worship its monogrammed goods and became its single-most lucrative market in Asia have suddenly decided to “switch sides”, mid-market and high-street fashion brands like homegrown label Uniqlo and Sweden’s H&M are flourishing in Japan’s busiest shopping districts – the same playground where luxury brands used to call home.

via Bloomberg / Times Online / FT.com/ The Independent